ITCs Agri Business

2. ITC's Agri-Business
one of India's largest exporters of agricultural products.
ITC is one of the country's biggest foreign exchange
earners (US $ 3.2 billion in the last decade.
The Company's 'e-Choupal' initiative is enabling Indian
agriculture significantly enhance its competitiveness by
empowering Indian farmers through the power of the
Internet.

3. Problem in agri-business
For ITC For Farmer
b)Inconsistent supply of raw a) lack of information
material.
d)Involvement of third party in b) less productivity
supply chain.
C) Delay in supply c) low price for their product
d) Bed quality of material
e) Getting raw material at high cost d) fails to supply on time
f) Less production.
g) less profit

4. To enhance rural incomes,
there is a need for a system which can…
•…deliver an end-to-end solution
who should be able to take an informed decision !!
with farmer having the freedom of choice !
•…deliver effective service
at low cost !!!
And the opportunity lies in building capacity to induce productivity led
growth by providing last mile connectivity
©1999-2005 ITC ltd

6. 3 Key Principles
•Empowerment
–Information and knowledge free of cost
•Choice
–Farmer choice to transact
•Business Model
–Fee to e-choupal Sanchalak for transactions
through him

7. Execution isn’t Easy!
•No telecom reach
–They use Satellite
communications
•No Power; Erratic Voltage
where it exists
–They use Solar Power
•First Time Computer Users
–Lot of effort on Capacity Building
•Resistance from traditional
middlemen
–Farmers dealt with them!

8. Production Channel Prior to
e-Choupal
Farmer
Regulated Markets
(15-75%)
Trader
Commission
Agent
Wholesaler
(20-80%)
Village Trader
Ghani
Producer
Coop (3-5%)
Cooperative Mill

9. The e-Choupal Business Model
Farmer
Regulated Markets
(Fair Market Price)
Private Miller
Commission Agent
(hired by ITC)
Village Trader
Ghani
Producer Coop
(Negotiated Price)
Cooperative Mill
E-Choupal
ITC
IT
C

C
o
m
m
is
s
io
n

10. Transaction Costs in Mandi Chain
Soybeans Example
Farmer Incurs
Trolley Freight to Mandi = 120
Labour = 50
Kacchha Adat = 150
Handling Loss = 50
Rs per MT
370
Processor
Incurs
Commission to Agent = 100
Cost of Gunny Bags (net) = 75
Freight to Factory = 120
Handling at Mandi = 40
335
Total Chain
705

11. Transaction Costs in Choupal Chain
Soybeans Example
Farmer Incurs
Trolley Freight to ITC Hub = 120
Labour = 50
Kacchha Adat = 150
Handling Loss = 50
Rs per MT
370
Processor
Incurs
Commission to Sanchalak = 100
Cost of Gunny Bags (net) = 75
Freight to Factory = 120
Storage & Handling at Hub = 40
335
Total Chain
705
120
50
Cash Disbursement Costs = 50
215
335

12. eChoupal benefits the farmer, by
•Enhancing farm productivity
Through bundling customised knowledge with input
deliveries
•Increasing farm gate price realisation
Through bundling information with cropping &
output marketing decisions
Through unbundling produce delivery, cash flow and
pricing

13. eChoupal benefits ITC, by
•Cutting down net cost of procurement,
despite offering better prices to the
farmers
By eliminating non-value adding costs in the
value chain
•Creating new business opportunities
e.g. marketing several goods & services to
the rural consumers
linking non-farm skill based services of rural
origin with the global markets